Palo Alto Weekly

News - June 25, 2008

Facebook rumored to be leaving downtown Palo Alto

Retailers, Realtors predict only short-term effects of Web firm's departure

by Arden Pennell

The social-networking firm Facebook, which houses roughly 600 employees in five offices in downtown Palo Alto, may uproot and move its operations to a central campus, the Wall Street Journal reported online Sunday.

The firm — which rents all its office space — is looking at various sites, including the former Hewlett-Packard Company buildings on Page Mill Road, Journal reporter Kara Swisher wrote in her online column, BoomTown.

A Facebook spokesperson confirmed possibility of a move yet said the destination is uncertain.

"We are pleased with the progress of our real-estate search but have not entered into any definitive agreement at this point," the spokesperson wrote in an e-mail.

The firm's influence has become unmistakable downtown, where it has been headquartered since 2004, growing steadily.

Its current offices are at 151, 156 and 180 University Ave. and 164 and 285 Hamilton Ave.

Employees clad in Facebook logo gear are a common site on University and the lunch line at the firm's newly opened cafeteria at the corner of University Avenue and Alma Street stretches around the block.

Until this month, the company offered a $600 monthly rent subsidy to employees who set down roots within a mile of the downtown offices.

Facebook's departure will have some impact on downtown, but just how big is unclear, local business owners and real-estate agents said.

The commercial market may see a small, short-term dip in sub-lease prices, according to Realtor Sam Arsan, who leases downtown properties.

Arsan, who said he represents landlords renting to Facebook, explained the firm has long-term leases of about five years. Those aren't about to expire, meaning the firm would have to sublease if it moved out within the next year, he said.

A sudden flush of properties on the sublease market would cause prices to drop slightly before rebounding due to high demand for downtown space, he said.

There have also been rumors that Facebook's now-defunct rent subsidy pushed already-high rents higher.

Marseille Jaco, a local residential real-estate agent, said demand is fierce in downtown, Facebook or no. Yet particularly in the $1,200 to $3,000 range — a range young, starting employees at Facebook likely desire — things are tight, she said.

"It's very hard to find that price range unless you go out and beat pavement and be very diligent in your effort, always," she said.

If the subsidy's cancellation and departure of the company from downtown causes a few hundred employees to look elsewhere, it could affect the already tight market — but she wasn't sure how much, she said.

Jessica Gilmartin, owner of the yogurt store Fraiche on Emerson Street, said the Web firm provides a steady stream of customers to her business.

"Obviously it would impact my business because they would come less," she said. But the often-crowded Fraiche wouldn't suffer long for the loss, she predicted.

Facebook's exit would have little effect on A.G. Ferrari Foods, located near Facebook offices at Hamilton Avenue and Emerson Street, according to Manager Brandon Calember.

The Italian-specialties store already lost Facebook's corporate business when the firm turned to larger caterers to stock its in-house cafes, Calember said.

"When you have lunch right there in your building as an option and it's free, why would you go out?" he asked rhetorically.

Sherry Bijan, president of the Palo Alto Downtown Business and Professional Association, said Facebook's been a good neighbor, encouraging employees to live downtown and shun cars. But she understands the desire for a larger space, she said.

"I was shocked to see that they're essentially in every nook and cranny of downtown [on a recent tour], so I don't blame them for seeking a campus, because that can't be an efficient way to run a business," she said.

Staff Writer Arden Pennell can be e-mailed at apennell@paweekly.com.

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